Pork Producers Encouraged to Manage Market Volatility with Forward Contracting

Farmscape for August 31, 2021

Full Interview 11:37 Listen

The Director of Risk Management with HAMS Marketing Services suggests those producers with prudent risk management strategies in place will be the best positioned to manage the current volatility in hog markets. Falling live hog values combined with anticipated high feed costs due to drought along with ongoing disruptions caused by COVID continue to contribute volatile hog markets. Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says producers are going to have to manage with tighter margins coming into the winter months.

Clip-Tyler Fulton-HAMS Marketing Services:
We’re looking at just recent days seeing very sharp declines in some of the pork product values. In particular the USDA quoted belly prices that were down roughly 50 dollars per hundredweight over the last 10 days or so, so it’s really an indication that maybe we’re coming off of the really very strong stable prices that we’ve been experiencing over the past three months or so. To be clear we’re coming off of just a phenomenal run of high hog prices so we could see some sharp declines and still be running at exceptional prices for the fall time frame.
It appears that we’re not done with disease yet. Despite wide-spread vaccinations there’s still some pretty major effects that are being felt throughout the supply chains and so it’s a fool’s game to figure out how COVID is going to next affect our sector but I think it’s fair to say that guys with prudent risk management strategies that are already being employed are likely best to weather the uncertainty.

Fulton says there are still really good forward pricing opportunities and, when one applies current feed costs, we’re probably seeing a better profitability potential than what’s common at this time of year.

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